Searles Valley Minerals and its predecessors have mined boron from California's Searles Lake without interruption since the nineteenth century. In June, it filed for bankruptcy. Last week, 5E Advanced Materials agreed to buy most of what it owns.
The deal covers two processing plants, about 9,000 acres of Searles Lake brine deposits, the Trona Railway short-line railroad, and a water utility that serves the surrounding Trona community in California's Mojave Desert.
The purchase price comes in three parts: about $3.4 million in cash, 8.3 million new shares of 5E stock, and a note of about $6.2 million. To fund the deal and cover working capital, 5E secured $10 million in bridge financing from Searles Valley Minerals' own ultimate parent company, according to the September 15 announcement — the seller's parent is lending the buyer the cash to make the purchase.
The share component is what existing holders need to understand. 5E will issue 8.3 million new shares as part of this deal. The company's free float — the shares currently available to trade — stands at about 11.1 million. Every new share issued means the same company is divided into more pieces, making each existing piece smaller.
Shares closed 21.36% higher at $2.5000 after the deal was announced, on dollar volume of about $6.9 million.
The transaction still requires approval from the Delaware bankruptcy court and, separately, federal authorization for the transfer of the railroad. Closing is expected in October.
The announcement does not name Searles Valley Minerals' ultimate parent. The same company whose subsidiary went into bankruptcy is now the one providing the funds for someone else to buy it out.